ISLAMABAD/PESHAWAR: In the context of public protests against increase in electricity bills and additional taxes across the country, top officials of the Power and Finance Division have suggested cuts in August and September bills to provide immediate relief to the public. are presented. , JEE News reported.
These proposals will be presented to Caretaker Prime Minister Anwar-ul-Haq Kakar in the next meeting of the Federal Cabinet to be held today (Tuesday).
The development came as inflation-affected people took to the streets in several parts of the country against high bills.
While details about the meeting are unknown, insiders told JEE News that one possible proposal includes a partial cut in electricity bills for August and September, which would serve as an initial relief measure. However, the proposed cuts will be applied to customers’ bills for six months of winter, reducing the immediate burden on consumers.
Additionally, the government has decided not to immediately pass on the impact of the latest quarterly adjustment tariff from FY23, which is Rs 5.40 per unit, to the next quarter. Instead, the plan is to phase out the increase over a six-month winter period spanning from October 2023 to March 2024.
By adopting this phased approach, price hikes can be mitigated, resulting in a reduction in the winter tariff from Rs 5.40 per unit to Rs 2.31 per unit.
The impact of Q3 FY23 at Rs 1.24 per unit will end in September 2023. In winter season, the power consumption is reduced to only 10-12kMW, which will reduce the electricity bills.
Therefore, the government has decided to transfer part of the expensive bills of August and September to the consumers in the six months of winter. However, there are suggestions that electricity bills should be cut by 30% to 35%, which will be passed on to consumers in the winter months.
As far as general sales tax (GST), withholding tax (WT) and deduction of surcharges from electricity bills are concerned, the finance ministry has to take the IMF on board. However, the official said the IMF could not approve a compromise on the tax revenue generation target, which is Rs 9.2 trillion. Hence, no relief was seen in the form of reduction in GST and WHT taxes.
Meanwhile, the Federal Cabinet has confirmed the shocking revelation that the average cost of electricity has gone up by Rs 14 per unit, from Rs 35 to Rs 49 per unit through annual rebasing, which the Govt. collected through electricity bills in August 2023.
The power ministry told the cabinet that an exchange rate of Rs 286 against the US dollar was used to determine the base tariff for the current financial year, which was much lower than the previous financial year. This left the government with no option but to increase the annual rebasing (AR) tariff to Rs 7 per unit.
The federal cabinet will now have two options – either scrap the AR collection of Rs 14 per unit collected through August 2023 electricity bills, or collect it in a surprise manner.
2 per unit is proposed to be charged during the next six months of the current financial year. At a time when the country is under the International Monetary Fund (IMF) programme, there is no possibility of any relief in taxes including GST and WHT.
During the scrutiny, the Cabinet revealed that the National Electric Power Regulatory Authority (NEPRA) had fixed the AR tariff at Rs 7 per unit, but the previous government implemented it in July 2023. The Ministry of Power did not collect Rs 7 per unit. the ski Annual Rebasing of Tariff in July 2023
The AR tariff was implemented in August 2023, so the electricity bill tariff increased by Rs 14 per unit at once. Thus, the average tariff has increased from Rs 35 to Rs 49 per unit from August 2023, and such a huge increase in electricity bills has sent shockwaves across the country.
Pakistan’s power sector is witnessing monster capacity charges, which are around Rs 18 per unit, the official said. Capacity charges have increased from Rs 1.3 trillion to Rs 1.6 trillion and need to be reduced through the use of additional packages for industries. This average tariff needs to be reduced from Rs 18 per unit to Rs 6 per unit to bring it in line with international best practices.
“Without addressing the issues of capacity charges, the cash-bleeding power sector cannot be fixed,” the official said.
When JEE News approached the power sector apex body to ask about adopting a conservation plan to reduce consumption, they said the conservation strategy would not reduce capacity charges. A multi-pronged strategy including revision of contracts with IPPs is needed to reduce capacity charges.
So far, the power ministry has signed revised agreements with some IPPs, but this resulted in a reduction of only Rs 0.85 per unit. However, there are some power producers with power projects related to the China-Pakistan Economic Corridor (CPEC) and some others where there has been no tariff revision, hence the need to find an amicable solution on a permanent basis.
